The trouble with net zero

The MTA’s budget is a curious thing. It’s a multi-billion-dollar behemoth with nearly no room for maneuvering. While a recent uptick in the economy has resulted in a slight surplus and a rosier outlook, recent developments from Long Island have cast a shadow over a key fundamental assumption. That assumption is the net-zero labor increase, and that development is a substantial award from a Presidential Emergency Board to the United Transportation Union.

The story is a familiar one: The UTU and MTA had been at odds over wage increases and a long-term contract. The MTA wanted to hold the line at a net-zero wage increase with raises in out-years and benefits contributions from retirees. The UTU didn’t want to embrace any of that. So under the Railway Labor Act, President Obama ordered a PEB to convene, and the award issue arrived last Saturday. It was bad news for the MTA though the award is non-binding.

As the UTU outlined in a release, the PEB decision went something like this. (You can read the full here in PDF form.)

The three board members recommended that the LIRR pay wage increase totaling 18.4 percent over six years (2.9 percent per year) and employees begin contributing to health insurance premium costs. After factoring in the recommended employee health insurance contributions, the board’s recommendations would still produce net wage increases of 2.5 percent per year…

The board’s wage recommendations are retroactive to the first year of the contract dispute, which has been ongoing for more than three years. The board rejected MTA’s demand that workers accept three years of net zero wage increases, followed by two, two-percent increases over five years. The board also rejected MTA’s demand for major concessions in pensions, including a permanent five percent employee contribution. The PEB also rejected MTA’s demand that retirees begin paying for health insurance and that railroad retirement disability pensions be offset by LIRR’s pension payments.

PEB recommendations include that employees begin contributing to health insurance premium costs, beginning at one percent of 40 hours straight-time pay, at the contract’s opening date of June 16, 2010, and increasing by .25 percent increments each year thereafter. MTA had proposed larger employee contributions, while the affected unions had proposed no contributions from current employees.

Procedurally, the MTA and UTU now have 30 days — or until January 20 — to work out a deal, and then either party can request a second PEB hearing. Following that hearing, absent an agreement, the unions could legally strike. This clearly differs from the situation with the TWU, as the Taylor Law prevents such a strike, but Local 100 leaders are supporting the UTU in any action it may take.

From a substantive point, the key line in the PEB report it this: “It simply cannot be concluded that the MTA’s current financial position is one in which it is unable to pay for wage adjustments that are otherwise warranted.” In deciding as much, the Board pointed to Pay-As-You-Go resources and the MTA’s ability to borrow more money for wage increases. This is analysis that seems to exist in a short-term vacuum with no nod to context, but it’s also an argument we’ve heard before in the labor context.

For the MTA, this is a tough one. The Board has already announced that planned fare hikes in 2015 and 2017 will be lower than expected, but again, that decision rested on an net-zero wage increase. As the LIRR and UTU head toward a compromise, the MTA’s options will narrow, and staffing reductions may become necessary. Worker morale across the board is low, and strife between the unionized workers and management would be tremendously costly to riders.

We’ve seen this movie end before. The MTA’s budget outlook improves; labor demands increase; riders pay more. Until there is a fundamental change in work rules, pension contributions or labor practices, it always ends the same.

I disagree. When unions were strong, what they negotiated hit the rest of society (40 hour work week, employer sponsored benefits, etc…). When the rest of society said, “Forget about these guys, I’m not part of their union”, everyone suffered. I’d rather support hourly workers, but find a way to pay for it with today’s money. (Yes, I know your ‘generation greed’ mantra, Larry. I just don’t fully subscribe to it.) Trickle down economics was always a lie, but bottom-up economics is a religion I can be a part of.

Despite being part of the same agency as LIRR, MNR doesn’t seme to have the same issues amung it’s workforce. One thing that caught my atention over the past year or so is the increased number of female conductors on both railroads. It’s nice to see that, but if the MTA moves to electronic fare payment – a good number of them may not be needed. CalTrain via the Clipper card collects fares in such a manner & chicago’s new Ventra system will be doing the same on Metra soon.

“I have no problem with people being paid a fair wage, increasing relative to inflation, but hanging the increases on ability to take on debt, instead of increases in revenue, is insane.”

You are correct. Not only is it insane, but it should be overturned by lawsuit. I think the procedure is for the MTA to sue to find the actions of the PEB null and void due to being grossly unreasonable and an incorrect interpretation of the law.

Cost-of-living increases make sense to me, but it should come from, best to worst: improved efficiency, higher taxes, higher fares, or reduced service. Suggesting that the MTA can borrow more to pay increased operating costs is nothing short of insane.

Why is “fair” always based on the assumption that what currently exists is already equitable and that all you have to do is adjust for cost of living? The cost to the rider & taxpayer is based on 3 things: 1) wages; 2) benefits; and 3) work rules. Instead of everything being about #1 & #2, the agreement should entail giving big increases to #1, requiring some worker contributions for #2 and drastically changing #3 so the MTA doesn’t have to hire twice as many people for twice as long as is necessary to get the job done.

Yes, the unions can strike – and more importantly, management can unilaterally impose their terms after they run out of PEB appeals, unlike with the Taylor Rule/Triborough Amendment combo for the subway/buses.

That’s definitely the important bit. And they damn well should impose them.

The LIRR unions are the worst unions I’ve ever read about and among the most corrupt unions to still exist. The idea that the MTA should *BORROW* money to pay their wages is insane and arrogant. And it the union members want to raise everyone’s fares to pay their wages, they should be honest about it.

But my guess is that most New Yorkers will support net zero for decades and decades to come once they learn how much room there is for productivity growth.

Our subway alone has 45,000 employees (according to my copy of The Works) whereas (according to a cursory glance at the Web) London’s has only 19,000 and Singapore’s total public transit system (including taxis) has only 14,000.

Perhaps I’m not comparing apples to apples but I don’t think the MTA will have to work hard to convince NYers that its employees could, in all fairness, be expected to produce more.

As for NYCT, I don’t think there is quite as much fat to cut as you think.

As for the LIRR, that’s a different thing. I wonder what the heck is going on. The TWU complains that the MTA is always out to save money in the city to shift it elsewhere, and in this case they would have a point.

The PEB unfortunately is relying on the awful Zuccotti decision made in 2009 that gave the TWU 2 4% increases and 1 3% increase in the depths of the last MTA crisis. That decision also stated, as does this one, that the MTA could afford to pay those increases since it can always raise fares. We all know how that story turned out – fares were raised AND service was slashed to pay the TWU.

This decision is just as poor, and should be rejected by the MTA. If Stephen Smith is correct in stating that the MTA could unilaterally impose an agreement if they do fail in an appeal, I think they should and suffer a strike. To accept this agreement would impose a bargaining pattern that the TWU and other unions will undoubtedly use, and thus blow up the current MTA budget.

One of the reasons the MTA should cite when arguing their penury is that Long Island no longer pays as high a payroll tax rate as does NYC, after the State Senate Republicans successfully overturned that part of the 2009 MTA rescue agreement, backed up by Cuomo. The corollary to that decision, and this one, is that revenues from the Long Island region, both fares and taxes, are no longer high enough to support the same amount of LIRR service as in the past. Unless LIRR workers are willing to accept a lesser agreement commensurate with the lower payroll tax payments, service cuts should come from that region to offset the higher wages.